Intel to invest ‘unprecedented’ $25 billion in chip manufacturing plant in Israel

US semiconductor giant Intel Corp. has inked an agreement in principle with the Israeli government to build a chip manufacturing plant in Kiryat Gat at an investment of $25 billion.

Prime Minister Benjamin Netanyahu said the Intel investment was “unprecedented” in Israel and would go toward building a chip manufacturing plant that will use the most advanced technology in the world. In 2019, Intel already held talks for an investment of around $10 billion into building the Kiryat Gat chip plant.

“This is the largest investment ever in the State of Israel,” Netanyahu said at the weekly cabinet meeting on Sunday. “This is an expression of great confidence in the Israeli economy and exactly reflects the strength of the free economy that we have built here, and the technological economy that we are developing here.”

The announcement was made after an agreement in principle was reached between Intel and the Finance Ministry on the investment plans. As part of the agreement, Intel will pay a 7.5% tax rate, up from the 5% the chipmaker pays the state today, the Finance Ministry said in a statement. In addition, it was agreed that Intel would get a government grant at a rate of 12.8% of the investment amount under the Encouragement of Capital Investment Law (ECIL).

The Kiryat Gat factory is expected to open by 2027 and remain in operation until at least 2035, employing thousands of workers at higher-than-average wages, the ministry said.

“Intel’s investment will yield significant economic benefits to the State of Israel in general and to the southern region in particular,” said Budget Commissioner Yogev Gardos. “The negotiations with the company were… based on economic models to examine the benefits of the investment, in order to maximize value for the Israeli public while promoting investment in Israel against the alternative options available to Intel globally.”

Intel core processor Intel vPro. (Courtesy)

Since entering Israel in 1974, Intel has invested more than $17 billion in Israel and employs 11,700 employees at its three R&D centers — in Haifa, Petah Tikva and Jerusalem — as well as at its manufacturing plant in Kiryat Gat. Intel says it is currently responsible for creating indirect employments positions for approximately 42,000 workers in Israel.

“Israel is a global center of technical talent and innovation and one of Intel’s significant global manufacturing and R&D centers,” Intel said in a statement. “Our intention to expand manufacturing capacity in Israel is driven by our commitment to meeting future manufacturing needs and supporting Intel’s IDM 2.0 strategy, and we appreciate the continued support of the Israeli government.”

Last year, Intel acquired Israeli computing tech startup Granulate for a reported $650 million, marking the chipmaker’s seventh purchase of an Israeli company in just over five years.

The tech giant bought Mobileye, a Jerusalem-based maker of self-driving technologies, in 2017 for over $15 billion, a transaction that remains an Israeli company’s biggest exit to date. Mobileye has become a central part of Intel’s global operations as it looks to a future with fully autonomous vehicles.

Last week, Intel disclosed that Intel Israel in 2022 posted record exports of $8.7 billion, constituting 1.75% of Israel’s entire GDP and 5.5% of all Israeli high-tech exports, according to the firm’s corporate responsibility report. Furthermore, Intel Israel purchased $3.5 billion in goods and services from Israeli businesses, up 60% from the $2.2 billion recorded in 2021.